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Is a Mortgage Too Much in Retirement?

Oct 15, 2019 5 min read Rachel Moehl

Key Takeaways

  • Write down your wants after work — and what they'll cost.
  • Write down your needs in retirement (and their costs).
  • Plan for the home you want (or pare back).


The lifestyle you want to keep during retirement will shape your decision about the amount of housing debt you’ll carry with you into the professional afterlife. Recent statistical increases in housing debt shouldered by retired Americans mean that more retirees exercise less discretionary spending than ever before. According to the 2013 Survey of Consumer Finance, the median level of housing debt for Americans age 65 to 74 was 393% of what it was in 1989. That’s almost four times greater! (Read more about the survey here.)



Having a lot of housing debt can mean having to fork over a large monthly payment to a bank. That means you have less to spend on travel and recreation in retirement, and less to contribute to your financial obligations too. Consider the following before coming up with a firm decision about whether or not a mortgage should be part of your retirement plan.


Step 1: Envision your future

Clarifying your retirement vision is a must before you consider your future living arrangements. Ask yourself whether or not you want to be on the move, or rooted in a stationary home. Consider whether or not you want to deal with the upkeep of an owned house, or whether rental living might better support your desire to be active, social and relaxed. (Our handy infographic might help you make this decision.)

Start a list and pair your desires with a dollar amount. Find out how much a round-trip plane ticket to Dallas for a visit with the grandkids actually costs…and write it down. Calculate the amount it takes to enjoy a weekly date night, with dinner and a movie…and write that number down too. This reconnaissance will be crucial to calculating your monthly expenses.


Step 2: Account for existing or future financial obligations

During retirement, in addition to housing costs, you might have to afford:

  • Healthcare benefits beyond Medicare
  • Debt repayment on credit, vehicle loans, vacation spending, investment losses, school loans, home equity expenditures, etc.
  • Financial support for adult children with disabilities
  • Financial support for aging parents
  • Pet care costs and expenses
  • Funeral costs for a spouse or loved one
  • Taxes on capital property and any income you still receive


Step 3: Put it all together

When you combine the figures of what you want to spend to fulfill your retirement dreams with how much you need to spend to meet your financial obligations, you’ll end up with a figure that is (ideally) lower than the amount of money you have allotted for monthly retirement expenses. If your number is high, you’ll need to go back and check in with your vision. Is it possible to travel/dine out/see a show for less? You might have to reduce your discretionary spending to account for your housing needs.


Step 4: Choose your home

If your mortgage payment doesn’t fit within the boundaries of your total monthly financial resources, you might want to eliminate that mortgage. You can sell your home (retirees often prefer to downsize in order to minimize mortgage and upkeep expenses) and buy something less expensive, or rent something that falls within the realm of your budget. Remember that a smaller home or a rental apartment might afford you the opportunity to travel more (there’s less to maintain back home); while keeping your current home allows you to maintain the nostalgia and related lifestyle that you have enjoyed just steps beyond your front door.


Another avenue to consider…

During your working life, you acquired and paid off debt in amounts largely influenced by your family’s wage earnings. However, in retirement, your household earnings are generated by savings, pension and Social Security benefits rather than a salary. This is a new figure to get used to budgeting by; and likely a reduced one at that.

An added wrinkle is that Social Security and pension payments are likely to drop when a spouse dies. Using your spouse’s death benefit from a life insurance policy to pay off debt can help you reduce the amount that you need to draw from your savings to cover your monthly budget in retirement. Rather than downsizing your lifestyle, think about downsizing your housing debt by selling off capital assets, eliminating a mortgage, or using life insurance death benefits to reduce your debt.


What you can do next

The right roof over your head in retirement—and the right way to pay for it—depends largely on the lifestyle you'll want, the income and financial obligations you expect, and any gap between them. Start by envisioning your future—then see where you stand toward making it happen.


Rachel Moehl is a mother, wife and writer – in that order. She’s also very interested in tiny houses (how do people do that?!).


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